Cash Flow from Operations (Statement of Cash Flows)

This video demonstrates how to calculate Cash Flow from Operations (aka Operating Cash Flow) using the Indirect Method on the Statement of Cash Flows. The video uses a comprehensive example to show how Cash Flow from Operations is computed and explains how Cash Flow from Operations is different from Cash Flow from Investing and Cash Flow from Financing.
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[@zachdamanfiddy]

Absolutely fantastic. I'm an accounting major and my professor will often convolute concepts without simplifying them, these videos clear everything right up!

[@roxyrebel15]

Your videos are the reason I am passing my Financial Statement Analysis course with flying colors... Just want to say thank you!!

[@user-tc6ov5hp2d]

Thank you so much for making these videos. When I feel stressed out about my accounting homework I just watch some of these. It makes me feel SO much better. The information provided is informative, practical and accurate. This is such a huge help for my study.

[@Edspira]

Comments like these keep me motivated to put out more content. Thanks for sharing and good luck in your studies!

[@SensaSand]

I can listen to you talk for hours!! And you explain so well! 🙏🙏🙏

[@ruyixiaoguozi]

You explained so much better than the textbook.

[@MoeMerkin]

The depreciation expense being added back in was making no sense to me before watching this. Thanks a lot! This is perfect.

[@ladychelseaofthevoid]

These videos have been greatly helpful this semester. My Accounting textbook hardly explains how these equations work out, so seeing examples of these problems has been super beneficial. Thank you so much.

[@WK12112]

I've watched hundreds of videos for various courses and this is the best one by a long shot. Keep doing what you're doing. My god this was PERFECT

[@Edspira]

Thanks so much for your kind words!

[@loctruong5590]

I lost a whole day just want to understand operating cash flow but still got nothing. Finally, I end up watching this video. The best video for CFO on the internet.

[@Edspira]

Thank you!

[@kapri5095]

I just come to this channel anytime I don’t understand any financial statements related topics. Examples are so clear. He’s the best of the best. Thank you so much!!!

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don't take this the wrong way but i love you, thank you for these videos.

[@Edspira]

Love you back! BTW, your avatar is reminiscent of the Meow Meow Song : kzbin.info/www/bejne/iZPci3enbJuHbZY 😻

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@@Edspira i love you 2!!!

[@ju0697]

Still using these old videos for my CPA exam, these are so so helpful!!!!

[@BHkpopfan]

BEST accounting channel out here.

[@nappygodlotanna1570]

THANK YOU VERY MUCH FOR KEEPING IT SIMPLE AND STRAIGHT FORWARD

[@Edspira]

Nappy God Lotanna, It's my pleasure to offer these videos to those willing to learn. I have 9 videos on the statement of cash flows on my website. Eventually there will be quizzes and exercises as well, and everything will always be free of charge. Happy studying :) edspira.com/lessons/statement-cash-flows

[@Linda.LHCO.]

Thanks for this excellent explanation - I consider myself as a visual auditory kinesthetic learner and this is just perfect! 😊 👍

[@tracyellis4139]

I am so glad that I have found your videos. Very helpful and easy to understand!

[@haileymallard9410]

Thank you so much for these videos they are very clear, concise and helpful.

[@Edspira]

Glad you like them!

[@pubgmobile-kk1oq]

people who disliked the video ,,,,,, wtf is wrong with you guys. thank you for these videos absolutely a life saver.

[@Edspira]

Thank you for the kind words!

[@typarker4566]

You're quite an honorable man. Thank you for this video.

[@MyFinancialFocus]

Took me a while before I realized that the top half of the cash flows from operating activities relates to the income statement and the bottom half relates to the balance sheet.

[@evaneverything3978]

OMG your videos are so helpful!! Glad my friend referred this channel to me!!!!

[@Ausiedundan]

Thank god! This is explanation is SOOO MUCH better than my professor’s. But I’m sad that I didn’t find you earlier, b/c my final is tomorrow and I am screwed 🙃

[@excelence8393]

Thank you sooo much, but I have a question loss on equipment isnt an investment?

[@JOSEGONZALEZ-wx9fb]

Great class, very well explained. Thanks a lot and keep it up

[@crystalandrassy7409]

I am having trouble understanding why the increase in A/P would be added to cash instead of subtracted. If the company owes $30 more, shouldn't that be subtracted from the cash? Or is it because the company has the $30 currently because it hasn't been paid yet? Thanks

[@soupmaker44]

Very great explanation. Thank you

[@dreammajor]

Thanks so much. I took notes on your video. You have made my learning solid! This video is very much appreciated!!

[@Edspira]

No problem. Congratulations on mastering the topic!

[@nicholasto6585]

Thanks for all videos that you made! :)

[@Edspira]

+Nicholas To It was my pleasure. Thank you for the kind words!

[@一点一滴学英文]

Thank you so much for your excellent video! I have a quick question about inventory. If we think an increase in inventory comes from cash we used to purchase the inventory, so an increase of inventory is considered as a cash used by the entity, how should we think about an decrease in inventory? My understanding is that when there is an decrease of inventory, it is considered cost of goods sold, and cost of goods sold was subtracted from revenue when calculating net income. But cost of goods sold is not real cash flow out, so cost of goods sold should be added back in arriving at cash basis of net income. Is my understanding correct? cash from for inventory increase or decrease makes me confused for a long time. Your explanation makes me feel comfortable. thank you !

[@Edspira]

A decrease in inventory indicates that a company sold more goods than it purchased (which would increase cash). Decreasing inventory would therefore be a cash inflow. Great question Xuan!

[@一点一滴学英文]

thank you for your response! best wishes to you

[@bharatchaurasiya4561]

Step buy step buy watching video you are best sir nice keep learning knowledge I am from is Mumbai

[@Edspira]

Thanks, and hello to Mumbai!

[@rent1762]

Great video, definitely help with Accounting HW.

[@Edspira]

I'm glad you are finding the videos useful. Best of luck in your accounting classes!

[@discodancer22]

Your videos are invaluable! Thank you.

[@dbz-pk8mz]

Got a final in a few hours, great explanation!

[@discodancer22]

I have a question about "interest payable" on operating section of cashflow. Do we add the interest payable amount back in to operating cash flow because interest payable is an accrued account and cash was never actually transferred?

[@emmanuelramoroba6598]

hey Interest payable(Paid) is from investing activities therefore we deduct it(Subtract) from the investing activities,because is something that we pay for,so it reduces cash...hope this is helpful.

[@ghosttrader-x1n]

man im half way watching, and pause to say i love u haha, u r awesome

[@Edspira]

Thanks Jack. I'm happy to help!

[@mackrose27]

Can you make a video explaining the Direct method for Operation (statement of cash flows)?

[@battletsekoaila9983]

Net income after or before tax?

[@shangbiedu6408]

thanks sir !!! Really help !!

[@thethingis99]

Very helpful. Thanks!

[@joshjewelosila8786]

Thank you Sir!

[@akbarjonabbosov9412]

so clear, so nice,

[@amt202]

If the year has a net loss, where do we mention and calculate it in the operating activity?

[@pieterswiegers5886]

@Edspira if we have a loss on the sale of Equipment we add it back to Net Income, would that mean that if we have a Profit from the sale of Equipment that we would deduct it from Net Income ?

[@TheKali97]

How would unrealized gains from the sale of PPE be accounted for, if we flip the example and we have a 50 dollar gain, would it be deducted from net income? If that is the case, is the gain still defined as a a non-cash expense , since non cash expenses are transactions recorded on the income statement but for which cash has not actually been PAID.

[@TheKali97]

Just answered my own question from watching your video on accounting for a disposal of a fixed asset in the SOCF. Thanks Edspira!

[@abirahmed3267]

Love your videos man! One question, if the 950 dollars cash did get injected, why did we not add the whole 950 instead of just 50?

[@Potjandorie]

5:08 he kind of explains it here, although I am still a bit confused ;p Doubt you still needed it though, after 6 months

[@raccoon874]

*fuck yeah very well explained - wish you had some dividend and land/equipment sales in there*

[@mozpassion8996]

Hi there, how do we deal with provisions in the PL? Some companies put provisions on PL

[@Edspira]

If you see something like "Provision for Income Taxes" this is the same as "Income Tax Expense"

[@RenegadeMatrix]

Really appreciate the video, might be too detailed a question, but: I know from your prior videos on the balance sheet, accounts receivables closes with a debit balance (increases with a debit), so I was wondering why on the actual SEC filings on the cash flow stmt that IncreaseDecreaseInAccountsReceivable closes with a credit balance, and then we have to play around with the signs to get where we want to be for the cash flow from operations? I'm assuming there's a good reason for it, will continue to look for it.

[@stantan6130]

How does accounts payable and receivable affect our cash flow statement? I thought they won't be added back into our cash flow because we haven't realised the cash yet from either money coming in from receivables or money going out from payables.

[@lliwwerdna]

Wouldn't the increase in inventory already be accounted for in the net income figure?

[@Edspira]

Unfortunately not. You need to account for the change in inventory as part of cash flow from operations when you use the indirect method to prepare the statement of cash flows.

[@lliwwerdna]

Ah I see. Thank you for the quick response and all of the fantastic videos you've made!

[@Edspira]

No problem my friend! I hope you had a nice summer and are off to a great start for the semester!!

[@007galeon]

would you mind elaborating? doesn't the inventory decrease when we have sales that year?

[@deepakathuria3309]

arrirang boyd well the balance sheet shows the closing figure which means that it has already been accounted for

[@husainismaeel2981]

That was helpful. Thanks a lot!

[@ErinLAnderson]

Thank you.

[@devoos3157]

On Accounts Payable I'm still a little confused about. Are we adding back the the $30 because that's money coming inn as oppose to money that we owe that's going out? and that's why it's not a negative?

[@Glucoselord]

its because a/p increases from year 1 to year 2. an increase in a/p means that NI is showing more cash being used when no cash has actually been disbursed. So we add back the cash in the event of an increase of a/p and subtract a decrease in a/p.

[@devoos3157]

@@Glucoselord Thank You Frank!

[@mozpassion8996]

What if you have provisions? How do you do? Add to net income?

[@hadijarrah9696]

Isn’t the increase in accounts payable a cash outflow ? So it has to be negative?

[@snappysharonxx]

If it says something like accrual on gas and electricity would you put that in the operating activities?

[@012wtfez8]

Thanks for the vid.

[@nicholastan7700]

shouldnt you use the later year to minus the earlier year for the differences?

[@lubabamahzabin2169]

what will happen if increase in prepaid expenses and increase in expense payables?

[@Officialsearch21]

You would decrease cash by both amount because that was money leaving the door. An addition to that, if the prepaid account decreased from the beginning to the end you would increase that amount in your cash flows from operations because technically that money was already considered in a previous statement of cash flow.

[@beaupayne3406]

never thought dale doback would be the reason i graduate college.

[@tudon5774]

Thanks!

[@Edspira]

You're welcome. Good luck with your studies!

[@runaway_pod]

do you have a video for the direct method?

[@mozpassion8996]

Can we say we add back the 50 because is not from operation?

[@Edspira]

$50 was initially subtracted from revenue to get to Net Income on the Income Statement. The reason we are adding it back to Cash Flow from Operations is because we are converting Net Income to a cash basis. Gains and losses are accrual transactions. In this instance you could state that it isn't part of your core operations, but what if you slightly changed the issue and said the loss was due to a write-down of inventory. Inventory is a part of the company's operations, but we would still add the loss back to Net Income because it is a part of accrual accounting.

[@mozpassion8996]

Thanks. To calculate the CFO we use all current assets and all curret liabilities? Or just the 3 you mentioned. What if ancompany have a negative CFO for consecutive years? What does it mean?

[@sunnycmagaming5261]

i cant understand the loss added back to the cashflow

[@Ausiedundan]

Why isn’t “cash” under current assets not added or subtracted to the Net Income? It’s also a current asset though.

[@stormont666]

If there was a way to donate I would

[@PrivacyKingdoms]

u forgot to mention that accrued liabilities increases operating cash flow

[@pegihadrianto9356]

I don't get it. We are trying to adjust net income, account receivable and account payable have nothing to do with net income???? They belong to financial position...

[@niialaadjei4668]

Why isn't accoubt payable negative

[@Officialsearch21]

This looks more like the Direct method.

[@bestcity0979]

didnt help:?

[@Winteer10]

I am sorry but this is the worst video I have seen on KZbin. Give us a shorter and better explanation. No need to make a 10 min video. WHAT´S THE FORMULA!

[@MintP1cker]

but how do i know which accounts i should include in the operating section..cause there's usually alot and idk which ones to add tomorrow i have final exam 🥲